On August 29 of 2019, the Law for Strengthening of Competition Authorities was approved. This new law, which will come into effect once published, brings relevant changes to the competition rules and the authorities in charge of its control.
One of the main aspects is the transformation of the competition authority in order to grant it greater independence as it will now be in charge of a collegiate body of 3 members who will be full-time members in order to allow such body to be comprised of professional members who are independent and are not in positions that could imply conflicts of interest due to other work or affiliations.
One of the aspects that was substantially modified by the new law is control of business combinations, with the following relevant variations:
– The procedure is now modified to have two stages that could make for a more expedite process in the case of business combinations that are not complex and do not generate anti-competitive effects. In the first phase, the competition authority will have 30 calendar days to issue a resolution in which it may: i) authorize the merger; ii) subordinate its authorization to the fulfillment of commitments proposed by the notifiers; or iii) determine the beginning of the second phase. If the second phase is started, the competition authority will have up to 90 calendar days to issue a resolution in which it may: (i) authorize the business combination or subject it to commitments proposed by the notifiers; (ii) determine that the business combination has predictable anticompetitive effects and request that the notifiers must submit a proposal for remedial commitments; or (iii) prohibit the business combination if it considers that its will have negative effects on the market that cannot be compensated by the remedial commitments that the applicants may offer.
– The threshold for business combinations to be notified will be set by the competition authority within a range of 30,000 to 60,000 base salaries (currently approximately US$23.6 million to US$47.3 million). If the gross sales or joint productive assets of the economic agents are equal to or higher than the determined threshold, the business combination must be notified.
– An additional criterion is established in the definition of the business combinations that must be notified, pursuant to which at least two of the parties involved must have sales or productive assets equal to or higher than the threshold that will be determined by the competition authority within the range of 1,500 and 9,000 base salaries (currently approximately US$1.2 million to US$7 million). This will mean that business combinations between two economic agents in which one of them is relatively smaller and does not meet the individual threshold will not have to be notified to the respective competition authority.
– It incorporates the concept of unlawful business combinations, which in addition to including those that have anticompetitive effects, also includes those that have not been notified to the competition authority or were notified subsequent to their execution. This change clearly determines that the control of business combinations is undoubtedly prior to their execution, and therefore the parties must wait for a resolution from the competition authority before materializing the business combination.
– The parties will now have to pay a fee for the business combination notification according to the tariffs determined by the competition authority under the principle of service at cost.
Furthermore, the new law adjusts and expands the infractions, and establishes a significant increase in the amount and of fines by establishing a percentage of 0.1% to 10% of the revenue of the sanctioned company, depending on the severity of the infraction. The law also includes the possibility of immunity or fine reduction parties who acknowledge committing a violation of the law and collaborate with the investigation.
The law also includes, among other aspects, a new procedure for the investigation of infractions, grants powers of competition advocacy by virtue of which the authority will promote improvements in the competition process and eliminate distortions or entry barriers, and also provides for the possibility that economic agents may enter into voluntary compliance programs in matters of competition.
Within 12 months, the Executive Branch must issue a regulation of the law and, once the new collegiate body of the competition authority is formed, it will also have 12 months to issue technical guidelines on the analysis of anti-competitive practices, business combinations, sanctioning procedures and compliance programs.
Considering that the law will come into effect after its publication, but the new collegiate body will be constituted later and the regulation must also be issued, the market will have to wait for some guidance from the respective authorities as to the continuity of the procedures.